Monday, 17 February 2014

When a Director of a company takes money out of the business
in a form other to salary and dividends, which exceeds the amount of money they
have put in, this is known as a director’s loan. This could be money withdrawn
or even personal expenses claimed using company funds.

If the director’s
loan is paid off in full by the end of your company’s accounting period:

· -Your company does not pay corporation tax on the
loan.

· -You don’t need to tell HMRC about the loan on
your Company Tax Return.

You will, however, need to include it in your Company Tax
Return if you either:

· -Take a further loan within 30 days of (before or
after) the repayment.

· -Have arrangements in place for a further loan to
be made at the time of the repayment.

If your director’s
loan is paid off in full within 9 months and 1 day of the end of your company’s
accounting period:

· -Your company does not pay corporation tax on the
loan.

· -You must include details of that loan in your
Company Tax Return.

You will, however, need to pay Corporation Tax on the loan
if you either:

· -Take a further loan within 30 days of (before or
after) the repayment.

· -Have arrangements in place for a further loan to
be made at the time of the repayment.

If your director’s
loan is not paid off within 9 months and 1 day of the company’s accounting year
end:

· -Your company must pay Corporation Tax on the
loan – the current tax rate for a director’s loan is 25% of the loan (i.e. a
company with a director’s loan account which is £10,000 overdrawn will have to
pay £2500 corporation tax on that loan).

· -You must include details of the loan in your
Company Tax Return.

· -HMRC will charge interest on the amount unpaid.

Claiming relief after
your director’s loan has been repaid

If you do have to pay corporation tax and the director’s
loan has been paid back in full, the amount of the corporation tax can be
reclaimed. This can only be done in a window starting 9 months after the end of
the accounting period in which the loan was paid off. Claims must be made
before within 4 years from the end of the financial year in which the loan is
repaid. Any interest paid is not reclaimable.

Director’s Loans that
are written off or released

When the loan is written off or released, it does not need
to be repaid. Instead the amount written off is treated as personal income and
needs to be included on the personal self-assessment tax return, NIC’s will also
need to be paid.

Director’s Loan –
Change to Benefit In Kind

Previously, when the director’s loan account was overdrawn
by £5000 or more, the loan amount was treated as a benefit in kind. The threshold has since been increased to
£10,000.

This means that the director will have to pay income tax
based on HMRC’s official rate of interest of the loan if they owe the company
£10,000 or more. It must be reported on the director’s Self-Assessment Tax
Return. The benefit in kind can be avoided by paying interest to the company on
the loan at or above the HMRC official rate. Class 1A NIC’s will also have to
be payable by the company.

If the director owes less than £10,000 then they have no responsibilities
with regard to income tax and national insurance. They do, however, still have
to adhere to the above rules on corporation tax.

Closing the
loophole on bed and breakfasting

This loophole was widely used as a method to avoid paying
the corporation tax on the loan. Repayment of the loan would be made to the
company before the 9 months and 1 day deadline, but not long later the director
then re-loans the money. Even after the company pays the tax, the loophole was
available to re-loan the money not long afterwards and to then re-claim the
tax.

New rules have been brought in to deny relief where tax has
been paid if, within a 30 day period, repayments of more than £5000 are paid to
the company from directors and which are then later re-loaned.

Where this 30 day rule does not apply, relief will also be
denied if there are amounts outstanding of at least £15,000 at the time of
repayment and there are future arrangements or intentions to re- loan this
money to the director’s.

Thursday, 13 February 2014

Since July 2013, I have been employed at Brealey Foster
& Co as the placement student. In this role I am primarily responsible for
the personal tax element of our clients’ tax returns, but also will be assigned
tasks which offer an insight into different aspects of accounting.

Personally, the main reason for taking up a work placement
was to gain an understanding of what a career in accounting was about and to familiarise
myself with the office environment. This is possible in my current position as
I am able to experience all the topics that I studied during my first two years
of university using real figures that belong to actual people. A greater degree
of care and accuracy is therefore something that you will learn during an
accounting placement, which I hope to take forward with me in my final year of study
and into future job applications.

The change from theory to actual projects is initially
daunting, but once you settle into the job and the workplace it is very
satisfying to see happy clients and senior members of staff. The main advantage
of experiencing a placement is the increased level of confidence that it gives
you. Even self-assured individuals can develop skills to improve their appearance
to future employers.

No matter how confident you are, your personal skills can
always improve and weaknesses can be transformed into strengths. Before taking
on the work placement I feared that my lack of presenting skills would hold me
back in my career. Since coming into Brealey Foster & Co, I have been given
genuine responsibility which in turn means my role is client facing. As a
result, throughout the year my communication skills with clients have vastly
improved. Not only do you need to talk over the phone but are also involved in
meetings where you are in charge of giving guidance and explaining your work.

You will also improve your organisational skills. With
personal tax computations, there is a self-assessment deadline at the end of
January. Time management was therefore required to ensure that all work is
completed before the end date and all clients were happy.

The process of a work placement doesn't start on your first
day of work. The effort you put in towards application processes and interviews
will reflect well to employers. Getting a few knock-backs before my interview
with Brealey Foster & Co, allowed me time to evaluate the areas where I
needed to improve and it helped me to analyse what companies wanted in a
placement student. All in all, the route from deciding you want to do a
placement year all the way to completion is entirely worthwhile.

Wednesday, 12 February 2014

Nick Clegg has this week suggested that the Liberal
Democrats will enforce more taxes on the wealthy should they get in power. The ‘Mansion
Tax’ will be an annual levy of 1% on the taxpayers of all homes valued over
£2m. A move which is also supported by Labour, it was previously put forward in
the run up to the last election. The Conservatives opposed it, and so was not enacted
in the current coalition government.

The proposed levy promises to divide opinion, but for many
it will be seen as a welcome alternative to the existing policy of public
spending cuts. In answer to opposition, Clegg has claimed that relevant home
owners who are “asset rich” only and are not on high incomes may be able defer
payment. Certainly one to keep an eye on.

Monday, 3 February 2014

As featured in the
Autumn Statement, a new option will be available to married couples and civil
partnerships from the 2015/16 tax year onwards.

The new feature will
enable an individual to transfer up to £1000 of his/her personal allowance to
his/her spouse or civil partner. Couples that only live together and are not married/in a civil partnership will not be
eligible. In the following years from 2015/16, the transferable amount will be
increased in proportion with Personal Allowance levels.

This transfer will
only be allowed if both members of the marriage/civil partnership are
not higher rate of additional rate taxpayers (earning below £41,685 at current
levels).

As a result, it only
seems to benefit partners which have one member not earning as much as the
personal allowance figure. This transfer will enable the other partner to
reduce his/her tax bill by taking on the additional personal allowance.

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Welcome

Welcome to my firm. After my degree I joined KPMG London and then worked in the city in Corporate Finance. The family firm of chartered accountants has been established in Hinckley England for 50 years. I and my team look after 150 local businesses and also our London clients. Training has always been important to the firm. We have students on gap year from Sheffield Hallam university and on placement from local schools.

We work hard to support our clients to meet their business and financial objectives whether its routine company secretarial and registrar work, accounts and tax compliance, a new contract in China or the USA, a takeover, tax investigation, property development or special work.